Canadian stock market dipped on Thursday

Image Source : Krish Capital Pty Ltd

Index Update: Canadian stock market dipped on Thursday as investors traded cautiously factoring in the possibility of direct US involvement in the Middle East. The benchmark S&P/TSX Composite Index, today hit the day's high of 26,526.95 within a few minutes after opening below yesterday's close. Dropping again soon, it inched its way up later through the day and managed to settle at 26,506.00 down by 53.85 (or 0.20%).

Macro Update: The Canadian Federation of Independent Business Barometer long-term index revealed that 12-month expectations among small businesses increased by 7.3 points to 47.3 in June, from 40 of May, reflecting growing optimism amongst traders. As expected, the US Federal Reserve kept the interest rates unchanged at 4.25% to 4.50% for a fourth consecutive meeting yesterday with the Fed projecting two rate cuts later this year. In addition, the Fed's Chair Jerome Powell stated that inflation is expected to increase over the summer.

Top Movers:  Dollarama (0.74%), Capstone Mining (3.75%), and Bausch Health Companies (2.72%) were the notable losers. While Paramount Resources (2.67%), Empire Company (5.30%), and Rogers Communications (0.74%) were the prominent gainers.

Our Stance:  Currently, the index is testing a critical support zone near 26,300. Holding above this level is vital for preserving upward momentum. A break below 26,300 could signal a risk of retracement, with the next key support levels on the daily chart between 25,900 and 25,600. Sustaining these levels will be essential for the bullish trend to continue in the near term.

Commodity Update:  The dollar is poised for its biggest weekly gain in over a month amid heightened Middle East tensions, driving demand for safe-haven assets. Gold dropped 1.04% to $3,372.40, silver slid 1.55%, and copper eased 0.10%. Brent crude fell 1.90% to $77.33 after the White House said President Trump would decide on Iran-Israel war involvement in two weeks, though crude remained on track for a third consecutive weekly gain.

Technical Update:  On Thursday, the S&P/TSX Composite Index posted a modest decline, falling 53.85 points to close at 26,506.00, a loss of 0.20%. The healthcare sector was a notable drag on the index, sliding 1.63% during the session. From a technical perspective, the index remains in a favorable position, continuing to trade above its 21-period Simple Moving Average (SMA), which supports the broader bullish trend. The Relative Strength Index (RSI) stands at 65.08, indicating solid market strength while staying below overbought levels leaving room for additional upside. Currently, the index is testing a critical support zone near 26,300. Holding above this level is vital for preserving upward momentum. A break below 26,300 could signal a risk of retracement, with the next key support levels on the daily chart between 25,900 and 25,600. Sustaining these levels will be essential for the bullish trend to continue in the near term.